Build a simple, logical Chart of Accounts (CoA) with clear numeric ranges, concise account names, and limited income/expense buckets—focus on decision-driving categories like gross margin, payroll, and key operating expenses. Keep accounts under 80 for small businesses and use subaccounts for necessary detail.
Why the Chart of Accounts (CoA) matters
On the go? Listen on The Deep Dive — where we dig deeper into this topic: ‘240 Accounts to 48— The Chart of Accounts Blueprint That Boosted Profit 6%’. Listen or download.
A well-structured Chart of Accounts turns messy bookkeeping into actionable insights. It affects reporting clarity, tax prep, and how your team interprets profitability. Too many accounts create noise; too few hide important details. The right CoA shows where you make and spend money and supports reliable management reporting.
A quick story
A client in specialty coffee had 240 expense accounts—everything from ‘Coffee beans – small roaster’ to ‘Misc supplies – various’. Reports were unreadable. We consolidated to 48 meaningful accounts, creating subaccounts for inventory and COGS, and introduced a small ‘marketing’ split. After the change, the owner could see gross margin per product line and adjusted pricing, improving monthly profits by 6% within two months.
Core principles for an effective CoA
- Keep it simple — Aim for 40–80 accounts for most small businesses; use subaccounts only when you need detail for decisions.
- Use numeric ranges — Assign blocks: 1000s = Assets, 2000s = Liabilities, 3000s = Equity, 4000s = Income, 5000s = COGS, 6000s = Expenses. Keeps ordering consistent and scalable.
- Make names actionable — Use short, clear names: ‘Payroll – Wages’ not ‘Payroll expenses miscellaneous’.
- Separate non-operational items — Keep one-off gains/losses, interest, and taxes separate from operating results.
- Limit overlapping accounts — Avoid accounts that duplicate (e.g., ‘Office supplies’ and ‘Supplies – office’ in different buckets).
- Plan for reporting — Design accounts to feed your monthly management report and tax prep with minimal reclassification.
Recommended numeric ranges & example accounts
Use the following template as a starting point. Adjust names to your industry and needs. Keep top-level groups short and consistent. Numbers shown are examples and can be offset to allow additions.
| Account # | Name | Notes / Use |
| 1000 | Cash – Operating | Primary checking account |
| 1010 | Cash – Savings | Reserve / savings |
| 1200 | Accounts Receivable | Customer invoices outstanding |
| 1300 | Prepaid Expenses | Insurance, subscriptions (current) |
| 1500 | Inventory (current) | If applicable – use subaccounts by product line |
| 2000 | Accounts Payable | Vendor bills outstanding |
| 2100 | Payroll Liabilities | Taxes, benefits payable |
| 3000 | Owner’s Equity | Capital accounts |
| 4000 | Sales – Product | Primary revenue stream |
| 4010 | Sales – Services | Service revenue |
| 5000 | COGS – Product | Cost of goods sold |
| 6000 | Payroll – Wages | Gross wages expense |
| 6100 | Payroll – Employer Taxes | Employer payroll taxes |
| 6200 | Rent & Occupancy | Rent, utilities for location |
| 6300 | Marketing & Advertising | Ads, promotions, website |
| 6400 | Office Supplies | Consumables |
| 6500 | Professional Fees | Legal, accounting |
| 6600 | Bank Fees & Merchant Fees | Processing and bank charges |
| 6700 | Depreciation & Amortization | Non-cash expense |
| 7000 | Interest Expense | Loan interest |
| 8000 | Other Income/Expense | Non-operational items |
Design tips by business model
Retail / e-commerce: separate Sales by channel and have Inventory COGS subaccounts per product family. Service businesses: focus on labor, subcontractors, and direct project costs. Restaurants: separate food/beverage COGS, labor, and payroll taxes. SaaS/subscription: track recurring revenue, deferred revenue, and customer acquisition costs separately.
Step-by-step: implement or clean up your CoA
- Export your current Chart of Accounts from QuickBooks/Xero as CSV.
- Map current accounts to the recommended template: mark duplicates, low-use, and near-duplicates.
- Consolidate similar accounts into a single account with subaccounts as needed (e.g., ‘Office Supplies’ → subaccounts for ‘Hardware’ if needed).
- Rename accounts with concise, actionable labels (max 30 characters recommended).
- Create a mapping document (old account → new account) and keep it for audit trails.
- Update your bookkeeping software and test with one month of transactions in a sandbox or backup copy.
- Train staff on new account usage and update internal SOPs for coding transactions.
- Review after two months and tweak as needed.
Sample Chart of Accounts (CSV) — paste into a sheet
Account Number,Account Name,Account Type,Detail Type,Description
1000,Cash – Operating,Bank,Savings,Cash in operating account
1010,Cash – Savings,Bank,Savings,Reserve account
1200,Accounts Receivable,Accounts Receivable,Accounts Receivable,Customer invoices
1500,Inventory (current),Inventory,Inventory,Inventory – finished goods
4000,Sales – Product,Income,Sales,Product sales
4010,Sales – Services,Income,Sales,Service revenue
5000,COGS – Product,Cost of Goods Sold,COGS,Product costs
6000,Payroll – Wages,Expense,Payroll,Gross wages
6300,Marketing & Advertising,Expense,Advertising,Ads and promotions
6600,Bank Fees & Merchant Fees,Expense,Bank Charges,Processing fees
Here’s a ready-to-use CSV you can open in Google Sheets or Excel.
Download the CSV — Sample Chart of Accounts
Worksheet — CoA design decision table
Use this to map old accounts to the new structure and record rationale. Copy into a spreadsheet for rollout.
| Old Account # / Name | Proposed New Account # / Name | Reason for change | Action (Merge/Rename/Create) | Owner / Due Date |
| 4300 – Misc Revenue | 4010 – Sales – Services | Consolidate misc revenue into services | Merge | Brian / 2025-11-05 |
| 5230 – Coffee beans – small roaster | 5000 – COGS – Product (Coffee) | Consolidate multiple COGS into product families | Merge | Ops / 2025-11-05 |
| 7100 – Loan interest expense | 7000 – Interest Expense | Standardize interest accounts | Rename | Accounting / 2025-11-05 |
CSV copy (paste into sheet)
Old Account # / Name,Proposed New Account # / Name,Reason for change,Action (Merge/Rename/Create),Owner / Due Date
4300 – Misc Revenue,4010 – Sales – Services,Consolidate misc revenue into services,Merge,Brian / 2025-11-05
5230 – Coffee beans – small roaster,5000 – COGS – Product (Coffee),Consolidate multiple COGS into product families,Merge,Ops / 2025-11-05
7100 – Loan interest expense,7000 – Interest Expense,Standardize interest accounts,Rename,Accounting / 2025-11-05
Here’s a ready-to-use CSV you can open in Google Sheets or Excel.
Download the File — Sample Chart of Accounts Worksheet
Common pitfalls and how to avoid them
- Overcomplicating early — Don’t create accounts for one-off items—use memo fields or class tags instead.
- Renumbering without plan — Reserve blocks for future growth and document any numbering scheme changes.
- Ignoring tax mapping — Ensure accounts align with tax categories and discuss major changes with your CPA.
- Not training staff — Provide clear SOPs and examples for coding common transactions; run a sample month review.
Next steps / CTA
- Export your current CoA and paste the CSV template into a sheet.
- Use the worksheet to map changes and assign an owner.
- Schedule a setup or review call: https://calendly.com/mrbrian-gieslertranbookkeeping/30min
FAQs
Q: How many accounts should a small business have?
A: Typically 40–80 accounts; use subaccounts for needed detail. Keep it as small as possible while preserving decision-making detail.
Q: Can I rename accounts in QuickBooks?
A: Yes — but always keep a mapping of old to new names for audit trails and historical reporting. Use a test company or backup when making bulk changes.
Q: Should I split income by product or channel?
A: If channels have meaningfully different margins or costs, split them (e.g., Online sales vs Wholesale). Otherwise consolidate for clarity.
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